Daily Close Above Would Signal More Protracted Retracement Phase

Transcription

1 12 June 2009 USD/CAD on Verge of Bullish Trend Reversal Global FX Strategy George Davis, CMT Chief Technical Analyst RBC Dominion Securities Inc Daily Close Above Would Signal More Protracted Retracement Phase FX Bottom Line: A daily close above would generate a bullish trend reversal for USD/CAD and signal that a more protracted retracement is underway, targeting and Bearish set-ups for the CAD on the crosses are also contributing to this shift in CAD sentiment. We have been highlighting the risks of a price correction developing in USD/CAD for the past two weeks after an oversold divergence formed on the daily studies. We note that a daily close above a descending channel top at would confirm this technical thesis via a bullish medium-term trend reversal. This would signal that a shift in sentiment is underway and set the stage for a greater retracement toward , followed by We note that 38.2% Fibonacci retracement of the March-June decline is at , with 50% retracement at and 61.8% retracement at Support is located at and with a close below now required in order to generate a new phase of weakness in USD/CAD. The shift in CAD sentiment is being witnessed not just against the USD, but also against the EUR, GBP, JPY, AUD, NZD and MXN (see pages 2-7 for cross charts). Bearish trend reversals for the CAD on the crosses would add to upward price momentum in USD/CAD and provide trading and hedging opportunities. Daily USD/CAD Candle Chart: Bullish Channel Breakout Above For required conflicts disclosures, please see last page. See RBC s research at

2 12 June 2009 Global FX Strategy: USD/CAD on Verge of Bullish Trend Reversal Bullish Set-Up Above for EUR/CAD Like USD/CAD, EUR/CAD is poised to generate a bullish channel breakout. We note that a daily close above the descending channel top at would produce a bullish trend reversal for the cross. This development would highlight resistance levels at and Support is now located at and A daily close above the descending channel top at would also add to upward momentum in USD/CAD. Daily EUR/CAD Candle Chart: Testing Channel Top at

3 Global FX Strategy: USD/CAD on Verge of Bullish Trend Reversal 12 June 2009 GBP/CAD Pierces Resistance at GBP/CAD is challenging a double top at after registering a bullish trend reversal above yesterday. A daily close would project additional gains to the January 16 high at , followed by Support is now located at and Daily GBP/CAD Candle Chart: Testing a Key Double Top 3

4 12 June 2009 Global FX Strategy: USD/CAD on Verge of Bullish Trend Reversal CAD/JPY Resolving a Rising Wedge Pattern to the Downside CAD/JPY is poised to resolve a rising wedge pattern to the downside with a daily close below The daily studies have traced out a bearish divergence from overbought levels. A close below would favour additional weakness toward secondary support levels at and Resistance is now located at and Daily CAD/JPY Candle Chart: Rising Wedge Pattern in Place 4

5 Global FX Strategy: USD/CAD on Verge of Bullish Trend Reversal 12 June 2009 Bullish Triangle Breakout for AUD/CAD To add to the CAD s misery, we note that AUD/CAD has just resolved an ascending triangle pattern to the topside. The bullish pattern resolution above projects additional gains toward the trendline at , followed by Note that the triangle pattern has a measured move objective of Support is now located at and Daily AUD/CAD Candle Chart: Bullish Triangle Breakout 5

6 12 June 2009 Global FX Strategy: USD/CAD on Verge of Bullish Trend Reversal Bullish Triangle Breakout for NZD/CAD as Well Like AUD/CAD, NZD/CAD has also generated the bullish resolution of a triangle pattern this time a symmetrical triangle. The bullish pattern resolution above projects additional gains toward , followed by the April high at The triangle pattern has a measured move objective of Support is now located at and Daily NZD/CAD Candle Chart: Symmetrical Triangle Breakout 6

7 Global FX Strategy: USD/CAD on Verge of Bullish Trend Reversal 12 June 2009 CAD/MXN Resolving a Rising Wedge Pattern Last but not least, CAD/MXN is in the process of piercing a support trendline at A daily close below this level would produce the bearish resolution of a rising wedge pattern and project additional losses toward and Note that the daily studies have traced out a bearish divergence from overbought levels. Resistance is now located at and Daily CAD/MXN Candle Chart: Breakdown From Rising Wedge Pattern 7

8 Global FX Strategy Russell Jones Global Head of Fixed Income and Currency Research Royal Bank of Canada Europe Limited Adam Cole Global Head, FX Strategy Royal Bank of Canada Europe Limited Sue Trinh Senior Currency Strategist Royal Bank of Canada, Sydney Branch Matthew Strauss CFA Senior Currency Strategist RBC Dominion Securities Inc David Watt Senior Currency Strategist RBC Dominion Securities Inc Disclaimer George Davis CMT Chief Technical Analyst RBC Dominion Securities Inc RBC Capital Markets is the business name used by certain subsidiaries of Royal Bank of Canada, including RBC Dominion Securities Inc., RBC Capital Markets Corporation, Royal Bank of Canada Europe Limited and Royal Bank of Canada - Sydney Branch. 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